Olympics

Marketing agreement an obstacle in U.S. bid to host in 2024

If Boston, Los Angeles, San Francisco or Washington is picked to host the 2024 Olympics, the U.S. Olympic Committee will pay the price for winning. One of its first tasks will be to hand over millions in sponsorships to the victorious city’s newly formed organizing committee.

It’s one of those costly facts of life in the Olympics thanks to the Joint Marketing Program Agreement that a country’s Olympic federation must sign when it puts a city up as a candidate to host the Games. It also played into the failures of New York and Chicago in the last two U.S. attempts to land the Olympics.

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The last two American bids have included agreements that didn’t conform with the International Olympic Committee’s guidelines, which call for around 90 percent of the host federation’s domestic sponsorship to be channeled to the new organizing committee. The USOC, not backed by any government funding, has balked at the terms because it would have trouble making up for the millions it gives away.

It would likely seek a different arrangement for a 2024 bid, as well.

”A lot of countries might say it’s not an issue,” said Jim Scherr, the CEO of the USOC when New York finished fourth in the 2012 bidding. ”They know if the Olympic committee loses money, the government will step in and make up the difference. You put it on the government’s tab and call it a day.”

Not so in the United States. In meetings last week with leaders of the four potential bid cities, USOC leaders spent a good amount of time explaining the JMPA. The USOC will decide early next year whether to bid for 2024.

”I acknowledge it’s been a contentious issue in the past, both with New York and Chicago,” CEO Scott Blackmun said. ”I can tell you we’re working hard to change our relationship with each bid city. We want to work with them to develop a structure that makes sense for us and them.”

Some form of the agreement has been in play since after the 1984 Olympics in Los Angeles, which were the first to truly cash in on the marketing power of the worldwide games. With fewer marketing rules in place, sponsors and the hosts ran into some awkward situations — for instance, film companies Kodak and Fuji wound up paying big bucks to different entities and ended up battling over the same Olympic ad space.

To avoid that, the IOC made the host country’s Olympic committee sign over the vast majority of its sponsorships to the organizing committee that forms when a city is awarded the Olympics. London’s domestic sponsorship program for the 2012 Games produced $1.15 billion.

IOC marketing director Timo Lumme says there’s some flexibility built into the program, so the USOC might not have to give away as much as some other countries, but the principle of the concept stays true.

”If you’re Company X, you don’t want, in the morning, a person from the organizing committee coming to you selling their wares, then in the afternoon someone from the U.S. team coming and doing the same thing,” Lumme said.

Most Olympic committees have been quick to sign the JMPA, knowing the surge in interest sparked by a home Olympics will lure new sponsors and, more importantly, that their national governments will step in to make up the difference.

But in the United States, the sponsorship market is considered close to tapped out and the federal government has a long history of not providing funding to the USOC.

That puts the USOC is a spot of not having any clear path to make up the sponsorship shortfall, which accounts for between 20 and 30 percent of its revenues ($168 million last year) — a good portion of which is used to fund Olympic athletes.

In the bid for 2012, the USOC didn’t put a signature on the JMPA with New York until the night before the voting. Chicago’s JMPA was signed about a month before the Games were awarded. Both cities finished fourth in the voting.

The USOC is optimistic its improving relationship with the IOC will provide some leeway if it bids for 2024. In 2012, the USOC and IOC came to terms over a long-simmering feud about revenue sharing, with the USOC agreeing not to take as big a portion of the money the IOC receives from sponsors and TV.

When that deal was resolved, the USOC said it would start looking into bidding for the Olympics again.

”With both the IOC and our potential bid cities, we have an opportunity to do things differently,” Blackmun said. ”The fact that we’re coming to the table trying to honor their principles and their needs is just going to make this process different than in the past.”